Earnings preview: H&R Block likely to report a net loss for Q2

H&R Block (NYSE: HRB), a leading provider of consumer tax services, is preparing to release its first-quarter financial results on Wednesday at 4:15 pm ET, and the market is having mixed expectations. The consensus estimate is for a loss of $0.75 per share, wider than the $0.72 per share loss reported a year earlier. Meanwhile, revenues are seen growing by 4.2% annually to $151.35 million.

Unlike in the fourth quarter, when the results benefitted from the busy tax season, the first-quarter outcome will be negatively impacted by the relatively slow activity.

The new business model adopted by the company, with focus on offering value-added services at competitive prices, is yielding the desired results. Nevertheless, the benefits will likely be offset by higher costs.  The management has been bringing innovation to tap the growing demand for do-it-yourself tax preparation services. As part of the efforts, the company’s digital platform is being given a facelift.

Also read: Expect another impressive show from Five Below in Q2

After rebounding in the final three months of last year, H&R Block is estimated to have returned to the negative territory in the soon-to-be-reported quarter. However, the bottom like might beat the estimates as it did in three of the four trailing quarters.

Revenues and earnings declined year-over-year in the fourth quarter of 2019 but came in above Wall Street’s prediction. At $2.33 billion, the top-line was down 2.5%. Earnings dropped 21% to $4.29 per share.

Related: H&R Block Q4 2019 Earnings Conference Call Transcript

Last month, H&R Block acquired Canadian financial technology startup Wave in a $405-million deal, which is expected to be accretive to earnings in the coming quarters.

Intuit Inc. (INTU), the developer popular tax preparation software TurboTax, earlier this month reported a 15% growth in fourth-quarter revenues to $994 million. As a result, the company swung to a profit of $0.09 per share from last year’s loss.

Analysts’ consensus rating on H&R Block’s stock is hold, with an average price target of $26.75. After the dismal start to 2019, the shares have been recovering since the beginning of the year. Currently, they are trading close to the levels seen a year ago.

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